tv Nightly Business Report PBS March 30, 2012 6:30pm-7:00pm PDT
>> the strength came from financials which was an area that didn't do real well last year and is indicative of some hope about a lasting economic recovery in the us. >> susie: march is not heading out like a lamb. this year it's a bull. we'll tell you why stocks charged ahead in the first three months of the year. it's "nightly business report" for friday, march 30. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening, everyone. tom hudson is off tonight. wall street wrapped up the first quarter with a positive close and what a quarter it was. all of the major averages posted stunning gains for the first three months of this year and many of them are in milestone territory. the nasdaq has done the best, up 19 % closing at 3,091. it's highest level in over 11 years. the s&p surged 12% and the dow is up 8%. as for today, here's a look at the closing numbers. the dow rose 66 points. the nasdaq fell almost four and the s&p up five. so what's behind the dramatic rally and will it continue into the current quarter? erika miller reports. >> reporter: it's not just the flowers and the trees blossoming
this spring. the stock market has also been blooming. and that has helped the performance of u.s. stock mutual funds. fund analysts see one stand-out for this quarter: the fairholme fund. so far it's up 29% this year, after losing more than that last year. >> it's sort of a worst to first story. they had a miserable last couple of years as a matter of fact. it's doing quite well this year, in part because bruce berkowitz who is the manager of that fund. a tremendous record over the long hall, but a rough patch the last couple of years, he has concentrated that fund largely, almost exclusively in financial names. >> reporter: but it wasn't just financials that did well in the first quarter. technology has also been a leader. apple has gained 48%, powering roughly 15% of the s&p 500's advance this year. the gains in technology and financials reflect investors increased appetite for risk. for that, analyst nick colas credits three factors: >> the first was we didn't have
a european debt crisis of the magnitude we were all worried about in the fourth quarter of last year. the second is that we still have a very accommodative federal reserve, allowing for very low interest rates and allowing people to buy risk assets like equities. and the third is that u.s. corporations are still generating a lot of profit in a very sluggish economic environment. >> reporter: sadly, retail investors have largely missed out on the stock market's big rally. many people are still battle scarred from the financial crisis, so they're investing defensively. >> it's interesting to me that investors can't stop stuffing money into taxable bond funds, even though yields are remarkably low, you have to wonder how much upside is there in that area of the market. >> reporter: but if you are one of the fortunate investors who has made a nice profit in stocks this quarter, it might be time to consider taking some profits. >> if you've made a lot of money in financials, made a lot of money in technology of the course of the first quarter, you might want to reallocate and start putting money into sectors that have underperformed. >> reporter: spring may be a time of rebirth for nature and the stock market. but watch out. typically, the strongest six
months of the year are between november and the end of april. leading to the old adage sell in may and go away. erika miller nightly business report new york. >> susie: still ahead, as we wrap up the first quarter, s&p's sam stovall joins us with a look at where the markets are going next. >> susie: sales breaking records. lines out the door. no, we are not talking about another apple product launch. this is the mega-millions lottery and it is now the biggest jackpot in history. sounds like a good business for the states that profit from ticket sales, right? but just how much do they get to keep and at what cost? darren gersh takes a look. >> reporter: the district of columbia isn't that big. just over 600,000 people live here. now think about this. >> we're projecting to do $2.5 million in mega-million sales. >> reporter: that's tracey cohen, chief operating officer of the d.c. lottery and she's already a big winner.
the district government is looking to keep $1 million of those ticket sales. pretty good for a couple days work. and the district has only been offering mega millions for a little over a year. >> it's like a 500% increase in sales! >> so the lottery is what's known as a voluntary tax. i pay my $5, five tickets please. and because i have almost no chance of winning, i have just voluntarily taxed myself $5. >> reporter: since the last jackpot was hit in january, mega millions has brought in $1.5 billion in national ticket sales. after taking out prize money, paying retailers and administrators, the d.c. government, the virgin islands and 42 states operating this lottery will split about $500 million in tax revenue. now, that sounds like a lot of money, but robert ward, who tracks lottery financing, says the benefits of state sponsored gambling are probably exaggerated. >> the great question is to what extent are we simply moving
money from one consumer activity to another. >> reporter: lottery officials say they are really selling entertainment. and that's how rhonda sessa of saverna park, maryland sees it. instead of buying drinks, she bought 12 tickets. >> cause it's exciting. everybody's doing it. >> reporter: so this voluntary tax is moving money from one business to another. ryan travers doesn't expect to win, but he laid down $10. >> instead, i'll pack lunch for a day, instead of buy. >> reporter: and it isn't easy for states to keep this voluntary tax going. many lottery games are mature-- meaning it is harder and harder to get people to play. and so you get mega millions. >> well, when the jackpot is $640 million, it's hard to pick a game that just pays out $500. people want the sizzle. >> reporter: if a district resident wins the mega lottery, the d.c. government could pick up an extra $40 million in taxes. so it's easy to see why governments want the sizzle, too. darren gersh, "nightly business report," washington. >> susie: a big problem tonight
for credit card firms mastercard, visa the companies report a third party card processor has experienced a data breach and that some customer accounts could be compromised. no details from mastercard and visa, but industry experts say the breach was massive, lasting thieves got the info they need to start printing new counterfeit cards. the "wall street journal" is reporting that the third party processor is global payments. but the atlanta-based firm is not commenting. >> susie: as we ntinue our >> susie: as we continue our look at the state of local housing markets, we head to houston. the city known for its ties to
the oil industry fared better than most during the housing downturn, thanks to a steady stream of oil money. but as andrew schneider of "houston pbs reports," the city couldn't escape the housing bust. >> reporter: september 2008 dealt houston's housing market a pair of crushing blows. first hurricane ike swept ashore, destroying or flooding more than a 100,000 homes. two days later, lehman brothers declared bankruptcy. the region's housing market, already flagging, went into a tailspin. fast forward to spring of 2012. houston's real estate is still a long way from the height of the boom years, but it's in better shape than most. shad bogany is broker-owner of e.r.a. bogany properties. >> houston prices have always been very steady. they go slowly up. appreciation may be 1%, 2%, very little 10% and 15% of appreciation. then also, we have a homestead
law that doesn't allow you to borrow more than your house is worth. >> reporter: the homestead law didn't make the city immune from foreclosures, but it did keep fewer houstonians from winding up in underwater mortgages when the market crashed. while the housing market is recovering, credit remains tight. that's making life difficult for would-be homebuyers. hersh levitt is president of the levitt partnership. >> they say there's 3.5%, 3.8% money out there, but the customers with the best credit and the best incomes still have trouble getting it. that's turning customers away. >> reporter: when credit starts flowing again, the houston market is likely to take off quickly. there's a lot of pent-up demand. commercial development is contributing as well. exxon mobil is building a new corporate campus just north of the city. the company plans to transfer thousands of jobs there from out of state. >> reporter: whatever the problems houston's housing market faces, the worst of the
crisis is behind it. now the bayou city is waiting for the rest of the country to catch up. andrew schneider, "nightly business report," houston. >> susie: next week, we continue our focus on the housing. we head to las vegas, where investors are gambling on a housing comeback and look at whether the american dream of home ownership is still viable. >> susie: attention all scrap bookers! craft giant michaels stores is going public again. the company said it plans to raise $500 million in an i.p.o. and use the cash to help pay down its significant debt. michaels was a publicly traded company until 2006, when bain capital and blackstone group bought it. no word yet on how many shares will be offered or the price
tag. the stock will trade here at the big-board under ticker symbol m.i.k. even though lotto mania spread to the n.y.s.e. today. investors still had time to bet on at least a few of their favorite stocks. turning to tonight's market focus, a lot of today's trading was about cheery u.s. consumers. investors learned consumer spending jumped 0.8% in february. its biggest gain in seven months. on top of that the university of michigan's final march reading for consumer sentiment rose to 76.2. the index is now at it's highest level in more than a year. economist drew matus explains why americans are feeling so chipper. >> it is being driven by higher job growth better income prospects, something that gets the consumer feeling better and over a long period of time they'll begging to act in a way that is more consistent with people that are less worried about the future.
>> susie: the upbeat consumer data triggered some nice buying in consumer oriented shares today. as a result, consumer staples were among the top three sectors in the s&p 500 joined by energy and health care shares. within consumer staples: philip morris, coca cola enterprises and campbell soup were tasty for shareholders. shares of liz claiborne also moved higher today, but on takeover buzz, not consumer spending. the apparel maker and retailer reportedly held talks with private equity firms and are looking for $20 a share. the stock rose 13% to close at $13.36. a $20 price tag would value liz at $2 billion. also in the spotlight in the apparel sector: the athletic outfitter finish line. but, it's stock tripped badly, after the company's year ahead forecast fell short of expectations. analysts had been bullish about finish line's future with licensed apparel and product launches tied to the summer olympics
shares of finish line dropped 16% to close at $21.22. and, there are accounting troubles for groupon. after the closing bell, the daily-deals company revised financial results for q4 and fiscal 2011. the new numbers show a bigger loss in q4 revenue than previously reported. the company said there's a, quote, "material weakness in its internal control." in regular trading, groupon shares gained nearly 4%, but after hours the stock fell. meanwhile, three big oil companies reached a settlement today with the state of alaska, allowing them to build a natural gas pipeline in the north slope. exxon mobil, conoco phillips and b.p. reportedly would ship production from the field to a planned facility on alaska's south coast. alaska had threatened to revoke the companies' leases in the region because they had been slow to drill there. all three of the oil stocks gained ground on that pipeline news and may have also gotten a boost from higher oil prices. oil futures spiked earlier today on word president obama is moving ahead with sanctions
against iranian oil buyers. the president decided to forge ahead with the sanctions, saying there was enough oil in the world market to allow countries to cut iranian exports. in new york trading, may crude futures gained about a quarter to close at $103.02 a barrel and are up nearly 6% this quarter. and, that's tonight's market focus. >> susie: our market monitor guest says the second quarter will be a good one for stocks, if you look at wall street history. he's sam stovall, chief equity strategist at s&p capital i.q. always a pleasure to have you back with us, sam. >> thank you, happy end of first quarter, sus-year. >> susie: and it was a great quarter.
investors had a nice rise since new area's day. and you're saying that the rallies could continue into the second quarter if wall street follows historical trends. you can explain that to us? >> absolutely. i like toing loo the a history but it's a guide, it's never gospel there is no guarantee that what happened in the past will work again in the future. but i think the past can be a bit comforting. whenever we have had an advance in the first quarter in excess of 5%, following an advance in the fourth quarter, in excess of 5%, as we did this time, the market has advanced 80% of the time in april, posting a 2.5% gain on average. and also has advanced more times than not in the second quarter, gaining 4% on average. so it appears as if possibly the trend will remain our friend. >> well, will it be true this time for this year's second quarter in 2012? >> i think that there is a good possibility it will. fed chairman bernanke just stated that he wants to maintain a very low-interest rate policy.
and is at the ready to initiate a third round of quantitative easing if need be. and also i think that the bar has been set very, very low for first-quarter earnings expectations, s&p consensus sis estimates are looking for less than a 1% gain in the first quarter with six of the ten sectors expected to show year-over-year decline. >> susie: all right, and speaking, you have identified a few of them that you think will do rather well in the second quarter. let's take a look at them here. industrials, technology, consumer discretionary companies on your list and consumer staples. what is going to drive these sectors? >> i think that what is going to drive them is a continuation of the momentum that has been built in,. let's face t we are now in the first year of a new bull market. after suffering through more than 21% decline on an intraday basis going back through the october of last year, and so history indicates that we're likely to see the cyclical sectors outperform, when you also
take a look at what the earnings expectations are. the leaders are likely to come from the consumer discretionary industrials consumer staples and technology sectors. >> and you have singled out a few stocks that fit 234509 sectors. and let's look at those. in the industrial space, a nice systems and technology, disney followed by care park in consumer staples. so tell us a little bit about why you have singled out these companies. >> well, obviously i started with the sectors that we do favor for the second quarter. and then i also put in several criterias-- criterias such as looking at those stocks with favorable investment ratings by equity iq that have ratings from our favorable model, and asking those technical consideration and hoping that therefore in the second quarter, they will remain momentum players. >> all right, now we've been
talking a lot about earnings here. and we see that some companies have already been putting on warnings for the first report are going to come out in the first couple of weeks. are you saying earnings growth is going to be kind of anemic. let's look at your forecast for the first quarters, up less than 1%. second quarter does a little bit better. and it gets 3we9er throughout the area. so with that kind of anemic growth how is this going to play out in the stock market? >> well, my belief is that this anemic growth has already been factored that share praise at this point. and that possibly wall street is expected that we will probably end up seeing a better-than-expected second half of the year. where most of the games are likely to be occurring in the fourth quarter. and so we're now expecting to see about a six percent increase in operating earnings for all of 2012, as compared with a 16% advance in 2011. and let's face t we're really just getting back to the longer term averages. >> all right. we're going to see how it doing. we're going check in with you in a few months and see if you are right about everything. sam, any disclosures to make
on these stocks that you mentioned? >> no, i do not own any of these, neither does s&p. although we might obviously follow these companies. >> all right, sam, thanks so much. have a great weekend. >> thank you. our market monitor sam to val, cheap eck commit-- equity manager at iq. there's a lot of talk these days about health care reform and cutting skyrocketing costs, but here's a story about one chicago man who's taking action. he's doing his part to bring down the costs of treating obesity-- a condition that costs the u.s. up to $150 billion annually in medical costs. as diane eastabrook reports, this entrepreneur knows the toll obesity can take, so he's doing something about it. >> reporter: francis wisnesky is a numbers guy. his math skills made him millions as a futures trader and senior portfolio manager at 44 asset management. but one number vexed wisnesky--- 360. that's how much weight the 38- year-old had packed onto his
six-foot-one frame. >> you think about it every day. you know every morning you wake up you're heavy. you get on a scale and you're like, "ah, i need to lose weight," and you can't beat it. >> reporter: but wisnesky is beating obesity. last year, he lost 60 pounds with help from a full-time personal trainer and in-home gym. that success inspired wisnesky to open downsize fitness last fall just west of his office in downtown chicago. the facility caters specifically to people like him, who desperately need to lose weight but are intimidated by conventional gyms. >> being a big guy and not being able to do 30 minutes on a treadmill just is embarrassing. a little bit and it's enough that you don't want to be in front of other people. >> back straight, tara, back straight. >> reporter: members are encouraged to come at least three days a week for hour-long classes in circuit training taught by former football coach jason burns. 60-year-old pamela wordlaw appreciates his gentle guidance.
>> we want to get that to rotate all the way up and all the way down. >> he tells me to just slow down, just do a little bit and i feel good with that. >> reporter: at $300 a month, membership to downsize fitness isn't cheap. but tara lawton thinks it's worth every penny. she's lost 40 pounds in six months. >> you know, i just looked at it like if i eliminate mcdonald's, eliminate my morning coffee and all the things that got me here that was my membership. >> reporter: for lisa dryer the expense is incentive to drive an hour to the gym nearly every day. >> i have really small goals. right now my goal is to just get out of the 300s. >> reporter: wisnesky has also opened a downsize fitness in las vegas and is about to open another in dallas. he thinks it could become a national chain. and while wisnesky doesn't think being a health club mogul is as lucrative as being a hedge fund manager-- the gyms offer something else. >> a lot of successful traders you'll talk to is that they don't feel that they're adding anything to society. there's a lot more personal
fulfillment in the gym than there is in the trading firm. >> reporter: diane eastabrook, "nightly business report," chicago. >> susie: if you were out of work in the past year, uncle sam wants to give you a break on your taxes. kevin mccormally has more as we wrap up our week long series of tax tips. he's editorial director at kiplinger's personal finance. >> you may have heard that the i.r.s. has a new program to help the unemployed who are having trouble coming up with the money to pay their taxes this spring. under this fresh start program, folks who were jobless for at least 30 days between the beginning of 2011 and the coming tax deadline can get a six month reprieve from the i.r.s.'s failure to pay penalty. usually, that levy mounts up at 0.5% for each month you're late, up to a maximum penalty of 25% of what you owe. under the relief program, they'll be no penalty if you pay up by october 15. the same reprieve applies to qualified self-employed workers whose business income shrank by at least 25% in 2011.
sounds good. but, of course, there are hoops to jump through. to protect yourself from the penalty, you have to file a new form 1127-a by april 17. and you still have to file your return or file a form 4868 to request an extension of time to file by the regular tax deadline. otherwise, you'll be hit with the failure to file penalty. that's 5% a month. and, oh, yeah: the law won't permit the i.r.s. waive the interest you'll owe for paying late. the current rate is 3% a year. those who take advantage of the fresh start will get a bill for the interest once they pay their taxes. it's no wonder people gripe about the complexity of the tax law. but the i.r.s. is trying to help people who need it. i'm kevin mccormally >> susie: there's still time to get your tax question to kevin. he's taking your tax questions online: nbr.com/tax tips. >> susie: here's what we're watching for next week. with consumer sentiment picking up, we'll see how the nation's
auto makers are doing with sales. and it's the new york auto show, we'll talk with the heads of hyundai, g.m. north america and ford sales. we'll also see the march jobs numbers. and monday, we talk with the head of u.b.s. america's robert wolf, about his outlook for the economy and his firm. after a difficult 2011. >> susie: and finally tonight, time for "lou's been thinking" with author and educator lou heckler. let's see what's on lou's mind tonight. >> i've been thinking about responsibility. like you, i occasionally have one of those nutty experiences at a retail store where someone in customer service explains why they can't help me. why do we place so many people in customer-contact spots and then not allow them to make responsible decisions? doesn't responsible mean able to respond? am i the only one who gets tired of being told, i'll have to ask harold about that? about five years after my wife and i built our current home, the driveway started to develop spider cracks.
we called the builder simply to ask for some advice. he came over himself and said, this looks like our fault. we'll pour you a new driveway. wow, we were well past any new- home warranty, but he took responsibility. so, how can we inspire that in the people who work for and with you? here are three ideas: one, make your policies short, clear, and do-able by everyone, top to bottom. two, support decisions your lower-level people make. don't give them responsibility without authority. three, ask if any of your current policies are in the way. maybe a current policy used to make sense but doesn't now. i always like the old joke that went like this: yep, old joe is a real responsible guy. if anything goes wrong around here, chances are he's respsible! if we empowering those around us with responsibility, old joe will become a model for the rest of us to follow. i'm lou heckler. >> susie: that's "nightly business report" for friday, march 30. i'm susie gharib. goodnight, everyone and have a great weekend. we hope to see all of you again next week.